For six decades, Warren Buffett shaped the development of Berkshire Hathaway as CEO – and in the process created one of the most extraordinary track records in stock market history.
• Berkshire Hathaway with 6,000,000 percent total return
• Warren Buffett relies on discipline, patience and clear principles
• The star investor also recognizes opportunities in turbulent times
Warren Buffett’s long-term track record is truly amazing. Since the takeover of Berkshire Hathaway in 1965, the company’s shares have achieved a total return of more than 6,000,000 percent, as reported by the financial portal Moneywise. At the same time, the broad market, measured against the S&P 500 including dividends, only reached 46,061 percent in the same period. Thanks to a consistently pursued investment strategy, Buffett beat the US leading index by an impressive factor of 130.
Key investments: Coca-Cola, American Express, Bank of America and Apple
Berkshire Hathaway’s long-term success is not based on short-term speculation, but rather on a few, consistently held, high-quality core investments. An example of this is the entry into Coca-Cola in the late 1980s – a brand with global reach and enormous pricing power. According to Moneywise, Buffett formulated his strategy clearly at the time: “We expect to hold these securities for the long term,” he wrote that year. “In fact, when we own shares in great companies with great management, our preferred holding period is forever.” The position developed into one of the most important earnings drivers over decades – not least through steadily increasing dividends.
The Oracle of Omaha also has a knack for recognizing opportunities in crises. Back in the 1960s, he took advantage of a crisis at American Express to get started. His well-known maxim: “Be fearful when others are greedy,” he once wrote, “and greedy when others are fearful.” The case shows how much Buffett relied on market exaggerations in times of crisis.
In addition, during the financial crisis, Buffett structured a billion-dollar investment in the then seriously ailing Bank of America with preferred shares and option rights. In doing so, he not only secured ongoing income, but also significant price gains if the bank recovered. As early as 1999, he commented on such situations to Businessweek with the words: “The best thing that can happen to us is when a great company gets into temporary trouble. We want to buy them when they are on the operating table.”
Even in his old age, Buffett still made significant contributions. Despite starting relatively late, joining Apple in 2016 turned out to be one of the biggest wins of his career. He saw the group less as a technology company and more as a consumer goods company – with perhaps the most loyal customer base in the world. The key was that he waited until he could clearly understand the business. Because one of Buffett’s important principles is: “Never invest in a company you don’t understand.”
Warren Buffett popularizes value investing
There is a pattern across all investments. Buffet’s success is based primarily on long-term holdings and taking advantage of market weaknesses. The figure of over 6,000,000 percent total return is less the result of individual spectacular deals – but rather the result of a consistently applied strategy over decades.
After 60 years at the helm of Berkshire, Buffett has not only created wealth for his shareholders, but also made the value investing strategy famous. Buffett did not invent value investing – his mentor Benjamin Graham did – but he implemented it very successfully and made it visible worldwide through his performance at Berkshire Hathaway. His success turned a somewhat academic strategy into a widely accepted investment principle. In addition, he has further developed the original approach because while Graham, as a bargain hunter, focused on buying undervalued stocks cheaply, Buffett makes sure to pay a fair price for high-quality companies with competitive advantages. This interpretation is often referred to as “quality value”.
Thomas Zoller, editorial team at finanzen.net
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